2011 (7) TMI 11 - SC - Customs

Supreme Court affirms Tribunal decision on Butyl Acrylate Monomer classification

Commissioner of Customs, Calcutta Versus GC. Jain & Anr.

The Supreme Court upheld the Tribunal's decision, dismissing the Revenue's appeals. It ruled that Butyl Acrylate Monomer (BAM) could be classified as an ... Classification - Import of Chemical - whether adhesive - Mis-declaration - Held that: - When it is found that the licences produced entitle the Respondent to clear the ex-bond goods free of duty, there are no reasons for them to have mis-declared the values since the goods are duty free. There appears no incentive to do so. There is no allegation that the licences produced will not cover the quantity of values, even after the alleged loading of values as declared. On the period of limitation - Availing of benefit of a notification, which the Revenue subsequently formed an opinion was not available, cannot lead to the charge of misdeclaration or mis-statement, etc. and even if an importer has wrongly claimed his benefit of the exemption, it is for the department to find out the correct legal position and to allow or disallow the same. In the instant case the appellant had declared the goods as Butyl Acrylate Monomer with correct classification of the same and the word 'adhesive' was added in the ex-bond bill as per the appellant's understanding that BAM is an adhesive. It was for the Revenue to check whether BAM was covered by the expression adhesive or not and if even after drawing of samples they have allowed the clearances to be effective as an adhesives appellant cannot be held responsible for the same and subsequently, if the Revenue has changed their opinion as regards the adhesive character of BAM, extended period cannot be invoked against them. Issues Involved:1. Classification of Butyl Acrylate Monomer (BAM) as an adhesive.2. Validity of the exemption claimed under the DEEC scheme.3. Alleged mis-declaration and invocation of extended period of limitation.4. Confiscation and penalties imposed by the Commissioner of Customs.Detailed Analysis:1. Classification of Butyl Acrylate Monomer (BAM) as an Adhesive:The primary issue revolves around whether BAM, in its imported monomer form, can be classified as an adhesive. The Respondents imported BAM and claimed it as an adhesive under the DEEC license, which allows duty-free import of adhesives. The Revenue contended that BAM is an organic chemical and not an adhesive as it requires further industrial processing to become an adhesive. The Tribunal, however, held that BAM, which undergoes self-polymerization upon exposure to light and heat, can be considered an adhesive as per trade understanding and usage.2. Validity of the Exemption Claimed under the DEEC Scheme:The Respondents availed the benefit of customs Notification Nos. 203/92 and 79/95, which allow duty-free import of adhesives. The Revenue argued that BAM, being a raw material for adhesives, does not qualify for this exemption. The Tribunal found that the goods were cleared by customs authorities after testing and were classified as adhesives. The Tribunal also noted that the technical literature from the manufacturer indicated BAM's use as an adhesive, supporting the Respondents' claim.3. Alleged Mis-declaration and Invocation of Extended Period of Limitation:The Commissioner of Customs had invoked the extended period of limitation, alleging mis-declaration by the Respondents. The Respondents argued that they had declared the goods correctly and that the customs authorities had cleared the goods after due verification. The Tribunal observed that there was no suppression of facts as the goods were tested and cleared by customs authorities. Hence, the extended period of limitation could not be invoked.4. Confiscation and Penalties Imposed by the Commissioner of Customs:The Commissioner had ordered the confiscation of goods and imposed penalties on the Respondents, including a significant penalty on the second Respondent, Shri R.K. Jain. The Tribunal set aside these penalties, stating that the goods were covered by the advance licenses and that there was no mis-declaration. The Tribunal also highlighted that the customs authorities had cleared the goods with full knowledge of their nature and classification.Conclusion:The Supreme Court upheld the decision of the Tribunal, dismissing the appeals filed by the Revenue. The Court concluded that BAM, which undergoes self-polymerization to become an adhesive, can be classified as an adhesive for the purpose of duty-free import under the DEEC scheme. The Court also ruled that the extended period of limitation was not applicable as there was no mis-declaration by the Respondents. Consequently, the confiscation and penalties imposed by the Commissioner were set aside, and the demand of duty was deemed time-barred. The appeals were dismissed without any orders as to costs.